Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: The Chairman of the Federal Reserve.
Speaker 3: That news conference ended almost as soon as it started.
Speaker 3: The FED chair thinks we're restrictive. Here are the scores
Speaker 3: for you in the equity market on the SMP five
Speaker 3: hundred boom vertical, almost straight away as soon as he
Speaker 3: started speaking. The equity market positive by one percent on
Speaker 3: the SMP on'm announcedack cup by one point one percent.
Speaker 3: The small caps bouncing back from a very very bad
Speaker 3: April here in May up by almost two percent. If
Speaker 3: you switch at the board once again, if it's a
Speaker 3: FED decision day, apparently it's a rally for the two
Speaker 3: year yield to lower by seven basis points four ninety
Speaker 3: six twenty two, and I think it's about four to
Speaker 3: twenty am in Tokyo. Dolly En looks a little something
Speaker 3: like this. I match and the Ministry of Finance is
Speaker 3: a little bit happier. It could have been a whole
Speaker 3: lot worse, Dolly n one fifty seven forty nine. Take
Speaker 3: a listen to what the Chairman of the Federal Reserve
Speaker 3: had to say.
Speaker 4: I do think the evidence shows, you know pretty clearly
Speaker 4: that policy is restrictive and his wing on demand, and
Speaker 4: there are a few places I would point to for that.
Speaker 4: You can start with the labor market. So demand is
Speaker 4: still strong, the demand side of the labor market in particular,
Speaker 4: but it's cooled from its extremely high level of a
Speaker 4: couple of years ago, and you see that in job openings.
Speaker 4: You saw more evidence of that today in the Jolts report.
Speaker 4: As you'll know, it's still higher than pre pandemic, but
Speaker 4: it has been coming down both in the Indeed Report
Speaker 4: and in the Jolts Report. That's demand cooling.
Speaker 2: No doubt.
Speaker 3: So for Nisson's macro, with this line, the statement retains
Speaker 3: its easing bias power beliefs that policy is restrictive. Look
Speaker 3: at the price sanction off the back of this, Bramo.
Speaker 3: The next sixty minutes of that news conference, next fifty
Speaker 3: minutes hardly worth your time.
Speaker 5: Well, especially because the next question was the question that
Speaker 5: was the key one popping the question that Julian Emmanuel
Speaker 5: was talking about, which is have you considered a hike?
Speaker 5: How big is the threshold? Not likely, We're not going
Speaker 5: to do that. So it was a one two punch.
Speaker 5: First policy was restrictive dubbish. Then hikes are not on
Speaker 5: the table, even a bigger rally, and frankly, that's what's
Speaker 5: feeling basically hawkish, isn't is sex.
Speaker 6: In their note Hatziism Company and their note started with
Speaker 6: the tapering action. I think it was the tanem. I
Speaker 6: agree with everything you've said. And it was over Johnny
Speaker 6: after not forty seconds. I think it was over after
Speaker 6: thirty three seconds. But with dat said, he delivered a
Speaker 6: lot of what people wanted as an adjustment. You saw
Speaker 6: it in the real yield. Let's come back a little bit.
Speaker 6: But you wonder what the follow is? The follow on
Speaker 6: is the first set of FED speakers out of the block.
Speaker 6: I mean, I mean, are they gonna are they gonna
Speaker 6: go with this tone?
Speaker 3: It's been a fantastic lineup of guests over the last
Speaker 3: couple of hours. Just to shout out to Bob Michael
Speaker 3: at JP Morgan and Mohammed al Arian asked about stack flation.
Speaker 3: To remember Buff's response to that. I think the Chairman's
Speaker 3: gonna laugh at that. Reflect on what happened to the
Speaker 3: folky is. I think he's gonna laugh. He said this
Speaker 3: no snack, this very little flation. Ultimately this no stack flation.
Speaker 1: Basically he laughed. He said you know, give me a break.
Speaker 1: This is not what we're talking about.
Speaker 5: Honestly, this is a FED show that came out much
Speaker 5: more dubbish than anyone had expected. And honestly, this raises
Speaker 5: a question about whether he is entertaining some.
Speaker 1: Of the key debates.
Speaker 5: He was asked by Michael McKee about long term neutral rates,
Speaker 5: not going to engage it, asked about long and variable
Speaker 5: lags stick in a script.
Speaker 1: There was no sense that he had entertained a lot of.
Speaker 5: The fundamental debates that are dividing Wall Street in a
Speaker 5: really serious way.
Speaker 1: I'm not sure where that leaves people.
Speaker 6: I noticed that off the GDP, where we've got a
Speaker 6: one point six percent statistic, what we heard interview after
Speaker 6: interview was domestic final sales was actually pretty buoyant. And
Speaker 6: that's what he alluded to when he went after the stagflation.
Speaker 3: Let's be clear, they're not going to count anytime soon.
Speaker 3: Based on what we just heard, the easing bias remains.
Speaker 3: It's just the amount of price action we've seen over
Speaker 3: the last couple of months. When we talked about the
Speaker 3: Fed champ being hawkish, it was hawkish relative to what
Speaker 3: we've had. This conversation all day relative to the previous meeting,
Speaker 3: maybe relative to the price action where we're price four
Speaker 3: right now.
Speaker 2: Very difficult to do.
Speaker 3: The bar for that was so high given the fact
Speaker 3: that this market is only price for one cut in
Speaker 3: twenty twenty four.
Speaker 1: Yeah, this didn't push against that.
Speaker 5: I mean, this could very much be consistent with only
Speaker 5: one rate cut, and that's why you're seeing a bigger move,
Speaker 5: arguably in stocks. Basically this is the perfect mix for stocks.
Speaker 5: Where people said you just need the tail risk of
Speaker 5: a hike off the table.
Speaker 1: He did that, and then you can really go to
Speaker 1: the races.
Speaker 6: When we get to Dudley, I'm going to talk about
Speaker 6: what wasn't talked about too much, which is a labor economy.
Speaker 6: What evidence do they need to see in the labor
Speaker 6: economy to really become accommodative, And to me, that's still
Speaker 6: really unanswered. I don't think it's claims. Maybe it's wages
Speaker 6: coming down all the time Forcelly and others, But I
Speaker 6: just really wonder what the labor dialogue is here rather
Speaker 6: than the parlor game.
Speaker 3: Of what is tak You're right, I would pad that
Speaker 3: with inflation. I think oh they got called it with
Speaker 3: these hot inflation prints temper their ability to respond to
Speaker 3: one first shocks the sub called fed put. Based on
Speaker 3: what we just heard in the last sixty minutes, the
Speaker 3: fed put is alive and well.
Speaker 5: Basically cyflation's not on the table.
Speaker 1: Stop it already. And that's basically what we heard.
Speaker 6: Can you set up a course where we have Frankfurt
Speaker 6: in London question quality brought over to Washington. Can you
Speaker 6: arrange that?
Speaker 2: Would you want me to offend everyone? No, I'm gonna
Speaker 2: come say it right now.
Speaker 6: There are too many questions that are off topic of
Speaker 6: the dual mandate of price change. Ethan Harris on fire
Speaker 6: and LinkedIn on this and on the labor economy. I
Speaker 6: didn't earn enough about the labor economy.
Speaker 7: I have to be I disagree with you. I felt
Speaker 7: like after the first two questions, people tried every which
Speaker 7: angle to get something more.
Speaker 1: It wasn't happening, period.
Speaker 2: Full stop.
Speaker 5: He was going to say what he was going to say,
Speaker 5: which is essentially, we haven't shifted our stance that much.
Speaker 1: We're not going to hike rates. Goodbye, see you next time.
Speaker 3: Let's speak to a man who's been on the other
Speaker 3: end to some of these questions. Bill Dentley former New
Speaker 3: York Fed President and Balloompag economic senior advisa, Bill, what
Speaker 3: did you make of that performance in that news conference?
Speaker 8: Thank your interpretation is exactly right. It was quite dubbish.
Speaker 8: And he basically said that despite the news that's come
Speaker 8: in economy, stronger than expected, inflation that's so good in
Speaker 8: the first three months of the year, the whole game
Speaker 8: plan is basically unchanged. We're going to keep rates here
Speaker 8: until we're highly confident that we're going get inflation down
Speaker 8: in two percent. No hint whatsoever of a rate hike,
Speaker 8: no hint that it's not going to work. So mark
Speaker 8: reaction I think was pretty appropriate given what he said.
Speaker 8: You know, he basically said, we've got it.
Speaker 6: Back to Dudley McKelvey of a few years ago. Bill, Dudley,
Speaker 6: you're in the trenches at gold and sex gaming the
Speaker 6: labor economy. What data in the labor economy is important
Speaker 6: to Chairman Powell to really become accommodative.
Speaker 8: I think it's the notion that the labor market is
Speaker 8: really starting to somehow fall apart and the unemployent rate
Speaker 8: is starting to rise significantly. He was asked pretty explicitly
Speaker 8: about that, and he basically said, one or two ten
Speaker 8: percent rise in the unemployer rate wouldn't really disturb him,
Speaker 8: you know, I think the interesting question is if the
Speaker 8: labor market really starts to deteriorate, the problem is that
Speaker 8: the next stop, partypically is a recession. We've never had
Speaker 8: half a percent rise in the unemployment rate without having
Speaker 8: a recession.
Speaker 9: I think it's done player and goes up a couple tens.
Speaker 8: I don't think it really bothers him. But if it
Speaker 8: feels like the labor market is really giving way, then
Speaker 8: the Fed will put a lot of weight on that,
Speaker 8: almost regardless of what inflation's doing.
Speaker 5: Bill, you said something, he basically said, we got it.
Speaker 5: The playbook hasn't changed.
Speaker 1: Was that the right move.
Speaker 8: Time will tell if the playbook is it will actually
Speaker 8: work with as well as he thinks. I mean, my
Speaker 8: own personal view is that the legs and launtry policy
Speaker 8: probably are not as long and very blessed he thinks.
Speaker 8: And I put a lot more weight on financial conditions
Speaker 8: I think than he is currently. The fact that people
Speaker 8: are taking his comments in a very positive way from
Speaker 8: financial market perspective means that we're having an easy of
Speaker 8: financial conditions, which will support the economy, So I think
Speaker 8: it just reinforces the higher for longer story over the
Speaker 8: medium term.
Speaker 5: He doesn't seem perturbed about that, And he also didn't
Speaker 5: really deal with a lot of the fundamental questions as
Speaker 5: we were just saying that have been dividing Wall Street.
Speaker 5: Didn't address the higher terminal rate. He didn't address this
Speaker 5: question of what would make him really a second guest
Speaker 5: idea of restrictiveness or long and variable lags. Do you
Speaker 5: think that means he's not thinking about it, or that
Speaker 5: he has rejected it, or do you think he just
Speaker 5: doesn't want to deal with it in the public right now.
Speaker 8: I think he's certainly thinking about it, But I think
Speaker 8: he's basically saying, from his perspective, the evidence hasn't convinced
Speaker 8: them that they're on the wrong track. So he thinks
Speaker 8: policy is restrictive, sufficiently restrictive to do the job. So
Speaker 8: maybe our starting and maybe the neutral rate is.
Speaker 9: A little bit higher, but it's not as high as
Speaker 9: where they are today.
Speaker 8: So yes, could our star be revised up at the
Speaker 8: next June Summary of Economic projections? Probably will be up
Speaker 8: revised up a bit, but policy in his mind is
Speaker 8: still sufficiently tight that he's not worried about that particular variable.
Speaker 6: Bill Dudley Ethan Harris has been on fire retired from
Speaker 6: Bank of America, almost daily on LinkedIn with really intelligent
Speaker 6: work on trim inflation means which inflation statistic is most
Speaker 6: informative now to our audience.
Speaker 8: To focus on services x housing for two reasons. Number one,
Speaker 8: this is the problem where the wage inflation drives the
Speaker 8: actual outcome in terms of services inflation. And number two,
Speaker 8: you know it's not being bounced around by the supply
Speaker 8: chain normalization process, which is pulling down as good prices.
Speaker 8: I think one of the things that's probably destorying the
Speaker 8: inflation news recently is the fact that goods prices came
Speaker 8: down a lot because of the normalization of supply chains.
Speaker 8: But we ignored the transmittory inflation on the way up.
Speaker 8: We also have to ignore it on the way down.
Speaker 8: So we don't want we don't want to overstate that
Speaker 8: goods price inflation weakness. So I think services sector x
Speaker 8: X housing is probably a really important thing to focus on.
Speaker 8: And you know, that's the so called last mile of inflation,
Speaker 8: and that's the part that's turning out to be more difficult.
Speaker 3: But we need to talk to you about the balance
Speaker 3: sheet as well. So the Federal Reserve announcing today they'll
Speaker 3: slow the pace of balance sheet runoff starting in June.
Speaker 3: The Central Bank to lower the treasury runoff cap to
Speaker 3: twenty five billion from sixty billion. Build market participants right
Speaker 3: now trying to work out, Okay, if QT wasn't bearish,
Speaker 3: is tapering QT bullish? But can you help me understand
Speaker 3: because we were told it's like watching paint dry. It
Speaker 3: has been when they start to undo it, unwind some
Speaker 3: of it. What does it all mean?
Speaker 8: I think it is like watching pink right. You can
Speaker 8: see that in the press conference there are originally no
Speaker 8: questions about the balance sheet, and he made it very
Speaker 8: clear that the balance sheet decisions are not part of
Speaker 8: the monetary policy process of making policy either either easier
Speaker 8: or tighter. I don't think it has much effect the
Speaker 8: taper because the destination is the same, the Feds going
Speaker 8: to a balance sheet size that generates reserves that are
Speaker 8: ample but not abundant like they are today. So we
Speaker 8: may get there slightly over a longer period of time
Speaker 8: because we're now running off securities at someone's slow place,
Speaker 8: but we're going to the same place, and so it
Speaker 8: really has virtually no market implications.
Speaker 5: If you were on the Fedstelle, Bill, would you have
Speaker 5: voted for this type of thing, or would you have
Speaker 5: aired a little bit more as you were talking about before,
Speaker 5: about financial conditions easing too much to allow inflation to
Speaker 5: stay sticky for too long.
Speaker 8: I don't think we're at this stage where you know,
Speaker 8: great hikes are warranted, and so I would have agreed
Speaker 8: with the decision today. I think where I would have
Speaker 8: maybe a bit different from cheer Paul a little bit.
Speaker 8: I would just be a little bit more cautious about
Speaker 8: the confidence that he's got it.
Speaker 2: Bill Dudley, thank you, sir.
Speaker 3: The former Fed New York President Bill Fantastic has always
Speaker 3: recority market fades a little bit. We're up by three
Speaker 3: quarters of one percent. Make so I appreciated the question
Speaker 3: at the end of the news conference. I'm not sure
Speaker 3: about the answer, because effectively, what the journalist in that
Speaker 3: news conference was asking is whether the lack of descent
Speaker 3: spoke to a lack of diversity of thought on the FMC.
Speaker 1: Correct.
Speaker 5: They weren't asking about you know what gender and precisely
Speaker 5: you know racial composition is on the FED. They were
Speaker 5: asking about pushback intellectual discourse, and this question about whether
Speaker 5: anyone was saying, hey, wait a second, maybe we shouldn't
Speaker 5: be so sure that long and variable lags have the
Speaker 5: same kind of effect as they have in the past.
Speaker 1: That I think is a legitimate question. He didn't address
Speaker 1: a bunch of questions.
Speaker 6: Oh here alluded to and I think Bob Michael's been
Speaker 6: leading on this, And I mentioned to you and Lingoln earlier,
Speaker 6: what if we get friendly data, what if we revert
Speaker 6: to a disinflationary vector. John, I'm doing some research here,
Speaker 6: and I mean, you know, I look at the G
Speaker 6: seven meeting in Pulia, trying.
Speaker 2: To make that here in June.
Speaker 6: And I'm sorry, I got a plane ticket of three
Speaker 6: thousand and six dollars, not even close to seven thousand
Speaker 6: dollars eight nine, ten months ago. I'm sorry. You get
Speaker 6: whispers a service sector disinflation, and you're right back to
Speaker 6: the boom economy DOW at five hundred what it was
Speaker 6: ten minutes.
Speaker 3: I'll repeat the question I asked a little bit earlier
Speaker 3: before the news conference started. I'll ignore the reference of
Speaker 3: the doll The three month average on payrolls is two
Speaker 3: seventy six. The Federal Reserve chair is just established, conveyed
Speaker 3: quite clearly that the Fed put is alive and well,
Speaker 3: they're willing to respond to adverse shocks, downside surprises, particularly
Speaker 3: if they emerge in the labor market. Now I'm trying
Speaker 3: to wonder, Lisa, what it would take to reintroduce the
Speaker 3: rate cut conversation. Clearly they still have a bias to
Speaker 3: ease to cut interest rates. Would it be a downside
Speaker 3: surprise on Friday? With that be sufficient? What would we
Speaker 3: need to see to get people talking about a different thing,
Speaker 3: not about hiking, about be sufficiently restrictive? After what we've
Speaker 3: just witnessed in that news conference, what would it take
Speaker 3: to have a series of guests to start talking about
Speaker 3: July at the Federal Reserve?
Speaker 5: And j Powell himself might have said, well, it would
Speaker 5: take a substantial weakening in the labor market. Does this
Speaker 5: market believe him that it really would or do they
Speaker 5: think that just the idea that yes, quits rates are increasing,
Speaker 5: see a slight increase in the labor market. And then
Speaker 5: to Mohammed's point, if you already see the weakness, it's
Speaker 5: too late. How much does that haunt him at a
Speaker 5: time where he's really embracing the recovery that we continue
Speaker 5: to see in the economy.
Speaker 3: Mike McKee was in that news conference. Mike McKee has
Speaker 3: run out of that news conference. He's with us right now.
Speaker 3: Mike great exchange with the Federal Reserve chairman in the
Speaker 3: last Now, what stood out for you?
Speaker 10: Well, I think the biggest thing is that there are
Speaker 10: two audiences here, or two people that are two things
Speaker 10: that the FED is trying to address. One is the
Speaker 10: markets and their perception of what the Fed is doing,
Speaker 10: and the other is the economy and what they need
Speaker 10: to do to bring down inflation. And the two things
Speaker 10: are not always compatible, and that's maybe what you have
Speaker 10: right now. The Fed is less concerned about how the
Speaker 10: market feels about all this than they are with setting
Speaker 10: their own parameters within their meeting of what they think
Speaker 10: they need to do, and at this point they don't
Speaker 10: think they need to do anything. The economy seems to
Speaker 10: be in good shape. We've seen a little bit of
Speaker 10: slow down, but we're supposed to see a slow down
Speaker 10: when they raise rates. We have seen inflation stall out.
Speaker 10: Maybe that means they haven't got policy tight enough. But
Speaker 10: now financial conditions have tightened, and so maybe that's going
Speaker 10: to start to work. Bottom line, they don't know what
Speaker 10: they're going to do, so they can't then give the
Speaker 10: markets a good clue.
Speaker 6: Mike, and the fan distributions of all this data, the probabilities,
Speaker 6: the outcomes of all this data, is there in place
Speaker 6: into the jobs report on Friday an ability to get
Speaker 6: back to a disinflation or a vector quickly.
Speaker 10: Probably not in the sense that we don't have any
Speaker 10: indication that hiring is going to significantly slow meeting any
Speaker 10: of the conditions that Jay Powell was talking about for
Speaker 10: a rate cut, and wages from all the other measures
Speaker 10: we've seen have still been running above inflation. So at
Speaker 10: this point one indicator isn't going to do it. It
Speaker 10: would take much more than that. If we got a
Speaker 10: significant rise in unemployment for some reason, then that would
Speaker 10: set some antenna up, but it wouldn't push anybody to
Speaker 10: do anything at this point.
Speaker 5: Mike, we talked a lot about how the key question
Speaker 5: was going to be whether they were entertaining the idea
Speaker 5: of rate hikes. Were you surprised, and he completely dismissed
Speaker 5: that out right.
Speaker 10: No, I wasn't surprised because Lisa, you just have to
Speaker 10: play game theory and ask what would have happened if
Speaker 10: he didn't dismiss it. Then all of a sudden, you've
Speaker 10: got people really moving the markets around trying to price
Speaker 10: for something like that. At this point, the FED doesn't
Speaker 10: see a reason to raise rates because they think that
Speaker 10: overall the economy is slowing a little bit as they
Speaker 10: want it to, and it is doing so without rising unemployment.
Speaker 10: So things are kind of working out the way they
Speaker 10: had planned.
Speaker 3: Mi mackay, great work has a waste, buddy, Well, can't
Speaker 3: chat with you tomorrow morning.
Speaker 2: Mi McKay.
Speaker 3: That breaking it down for you down in Washington, DC.
Speaker 3: That pop in the equity market get in sold just
Speaker 3: a little bit. We're still positive. But Tomney by zero
Speaker 3: point four percent?
Speaker 6: Can I go to November seven? November seven is two
Speaker 6: days after a modest election. I'm sorry, but that's the
Speaker 6: meeting I'm focused on. November seven could be wild.
Speaker 3: Hey, Eve's real He directs about it in the news conference.
Speaker 3: They do not want to talk about politics at all,
Speaker 3: not part of the conversation, and.
Speaker 5: They want to give the sense that they truly are
Speaker 5: independent at a time where they're actually being challenged in
Speaker 5: terms of their independence.
Speaker 1: The more people start talking about.
Speaker 5: When people, i mean the former president Trump comes out
Speaker 5: and starts talking about the potential for you know, taking
Speaker 5: ownership over fed decision making, they're going to be much
Speaker 5: more adamant about being.
Speaker 3: I'm waiting for him to address that story that came
Speaker 3: out from the Journal in the last week, still anonymous
Speaker 3: sources around the president talking about these issues.
Speaker 5: These are big issues, so you feel like people are
Speaker 5: kind of like spitballing out there and seeing how the
Speaker 5: people react to it before they yeah, yeah, before they
Speaker 5: really kind of put any emphasis behind it.
Speaker 3: Jeff Rosenbersts got things to say about this, joins us
Speaker 3: now from Black Rock. He really doesn't that take with us, Jeff,
Speaker 3: I'm not going there.
Speaker 2: Don't worry.
Speaker 3: Jeff is great to catch up with you as always, sir.
Speaker 3: After what you just heard, does it make you incrementally
Speaker 3: more bullish in any way, shape or form.
Speaker 11: Well, let's just say that going into this meeting, there
Speaker 11: was a lot of bearishness and fear that he would
Speaker 11: come out more hawkish. If you even look at you know,
Speaker 11: Bloomberg Economics put out their kind of preview, it was overwhelmingly.
Speaker 9: Expecting a very hawkish message.
Speaker 11: So I think there's a lot of relief here that
Speaker 11: the chairman stayed true to what we've seen from this chairman.
Speaker 11: He's been very much on the other side, has been
Speaker 11: one sided, looking at the glass half four and reiterating,
Speaker 11: you know, kind of the key point around an asymmetric
Speaker 11: response function. If inflation is higher and it has been
Speaker 11: higher over the last three months, okay, we won't cut
Speaker 11: as soon as we were anticipating. But the questions and
Speaker 11: people who tried to pigeonhole them on are you going
Speaker 11: to hike? Did you talk about hikes? You know, just
Speaker 11: deflected all of that, and.
Speaker 9: That was that was a relief.
Speaker 11: So the reiteration on the asymmetry as a result of
Speaker 11: the reiteration on they believe that policy is sufficiently restrictive.
Speaker 11: Those are two key things here that keeps a more
Speaker 11: dubvish orientation in the face of some challenging economic data.
Speaker 6: And Jeff Rozenberg on Planet Blackrock, is the economy doing okay?
Speaker 6: Is the real misestimation here? A one point six percent
Speaker 6: GDP which made a lot of news, but domestic final
Speaker 6: sales were much much better. Is it better out there
Speaker 6: than we actually think and that's why we're heard at
Speaker 6: Dubvish poll today.
Speaker 11: Well, I think you have a mixture there and you've
Speaker 11: heard it, you know, as part of the exchange during
Speaker 11: the Q and A. You know the aggregate data, Yes,
Speaker 11: one point six understates it because as you rightly point out,
Speaker 11: if we look at domestic demand, it's running at a
Speaker 11: stronger level.
Speaker 9: So the economy in aggregate terms is stronger.
Speaker 11: But what Bob Michelle talked about in the earlier or Michael,
Speaker 11: I'm not sure which way you pronounce it talk about
Speaker 11: is you know there are pockets that.
Speaker 2: Was I can confirm it's Michael, carry on, Jeff.
Speaker 9: Thank you.
Speaker 11: So there are pockets of hurt going on here, but
Speaker 11: there are also pockets of strength. So you have a
Speaker 11: distributional aspect in terms of what's going on in terms
Speaker 11: of the economic growth side. But clearly the amount of
Speaker 11: slowing it was a question in the Q and A,
Speaker 11: didn't you need to have more pain to get the disinflation.
Speaker 9: Good news is we're still on the.
Speaker 11: Path of the immaculate disinflation and the growth side is
Speaker 11: holding up. So I think that's quite supportive here to
Speaker 11: the risky asset perspective, it.
Speaker 5: Seems like this is more supportive to the risky ascids
Speaker 5: than it is to government bonds, right, I mean, this
Speaker 5: basically raises the specter of taking a rate hike off
Speaker 5: the table, which will benefit stocks of companies that have
Speaker 5: done really well with respect to earnings, but doesn't necessarily
Speaker 5: give that much of a boost to government bonds that
Speaker 5: are still subject to hire for longer. Is that kind
Speaker 5: of your view in terms of positioning on the heels
Speaker 5: of this on the margin, Yeah, And you know.
Speaker 11: I think we have to segment between the front end
Speaker 11: of the curve and the back end of the curve.
Speaker 11: When you know, I think this is challenging for the
Speaker 11: long run in the back end of the curve. Right,
Speaker 11: The FED is from the most part dismissive of the
Speaker 11: inflation increase. They're not really taking it in too much
Speaker 11: into account. The characterization of it was bumpy, what me worry.
Speaker 11: So that's fine, But if you're holding thirty years of
Speaker 11: debt at interest rates that you know may not sufficiently
Speaker 11: compensate you, if you are at a longer period of
Speaker 11: a three percent inflationary period, that's a bit challenging and
Speaker 11: a little bit problematic.
Speaker 9: I think for the front end.
Speaker 11: Of the curve, you know, it's a little bit easier
Speaker 11: story because you have less exposure because of the maturity
Speaker 11: and roll down that you benefit from there. But I
Speaker 11: think you have to be a little bit concerned about
Speaker 11: the longer run trajectory here, both from what we heard
Speaker 11: today in terms of monetary policy, but the other side
Speaker 11: of this, which we were a little bit this morning
Speaker 11: in terms of treasury refunding on the fiscal side, that's
Speaker 11: a bit more of a challenging environment for back end duration.
Speaker 9: JEF.
Speaker 2: I want to build on that just a little bit.
Speaker 3: Given how estamplished the reaction function is now at the
Speaker 3: Federal Reserve, highlighted again by the chairman in this news conference,
Speaker 3: how do you think HEELDS will respond to the longer
Speaker 3: end to incoming information the data on Friday an upside
Speaker 3: surprise versus say, a downside surprise.
Speaker 11: Yeah, you know, we're gonna pivot right to Friday and
Speaker 11: we'll be back and we'll talk to you guys then.
Speaker 11: But you know, I think that will very much be
Speaker 11: more about the front end reaction, because that's gonna be
Speaker 11: about is the FED really getting the slowdown in the
Speaker 11: labor markets, the normalization in the labor markets that they
Speaker 11: keep talking about, but the data isn't really supportive. Nonfarm
Speaker 11: payroll is not supportive, wage is not supportive.
Speaker 9: I'm a little.
Speaker 11: Surprised you to get more pushback on ECI, their favorite measure.
Speaker 9: Everybody expected it to go down. It went up.
Speaker 11: Yes, we can dismiss it and add special factors. It
Speaker 11: was a bit more state and local, it was a
Speaker 11: little bit more union than private. But it didn't go
Speaker 11: down as fast as the normalization would say. And there
Speaker 11: is that kind of lurking question, Mike McKee, you asked it,
Speaker 11: you know, are you not as restrictive as you think
Speaker 11: you are? And they'll continue to believe that they are restrictive.
Speaker 11: That's kind of the fundamental belief at this point. The
Speaker 11: question is if the data keeps pushing against that, then
Speaker 11: does the FED have to make a bigger pivot.
Speaker 9: Today was not that day.
Speaker 11: Way too soon to get there, and that's why Powell
Speaker 11: purposefully came out very dubvish. But inside the statement, one
Speaker 11: thing people one questioner picked up on. There are a
Speaker 11: little bit of hints here of moving around the removal
Speaker 11: of the kind of the implicit forward guidance on the
Speaker 11: peak policy rate, the implicit promise that the next move
Speaker 11: would be a cut in the introductory statement.
Speaker 9: I think that's notable.
Speaker 11: We'll see that in the minutes in terms of the
Speaker 11: debate and what the Chairman obviously couldn't talk about here,
Speaker 11: but next month we will talk about is the shifting
Speaker 11: in the distribution of the voting members with respect to
Speaker 11: their forecasts of economic policy that you didn't get this meeting,
Speaker 11: but obviously that's what the markets wants to see. And
Speaker 11: you can kind of read into the statement and the
Speaker 11: and the press conference that there is a shift going
Speaker 11: on there. It was underplayed, not really many people picked
Speaker 11: up on it. He wasn't going to highlight it, but
Speaker 11: you can see that is going on.
Speaker 3: Like ros Jeff Rosenberg right to catch up with you, sir.
Speaker 3: The shade at JP Morgan from Black Crost stop you
Speaker 3: think they kill Rick Rick Ryder?
Speaker 2: You know, Jpmurlgan.
Speaker 5: It's a fair mischaracterization. You think that was intentional? That
Speaker 5: was your takeaway from the.
Speaker 2: Jo of course it was I don't know who bub
Speaker 2: Michael is. Give me two great this s and P.
Speaker 3: Five hundred is fading going into the clothes let's bring
Speaker 3: up the chart briefly. We're up now by only a
Speaker 3: tenth of one percent at the peak. In that news conference,
Speaker 3: the S and P five hundred was positive by one
Speaker 3: point two. Something that sticks, though interestingly herely so it's
Speaker 3: the running bonds. The two are still down by about
Speaker 3: eight basis points.
Speaker 5: It took the prospect of hikes off the table, so
Speaker 5: that potential tail risk not necessarily there. I thought what
Speaker 5: Jeff Rosenberg said though about the long end was interesting
Speaker 5: and we're not seeing it in the price action at all,
Speaker 5: saying but that in the longer run this becomes a
Speaker 5: real problem for the long end. Essentially, if you have
Speaker 5: a FED that is hardwired to cut rates on any weakness,
Speaker 5: but not necessarily the high rates on the sense of
Speaker 5: any kind of durability of inflation, does that mean that
Speaker 5: inflation is going to stay higher for longer and that
Speaker 5: there needs to be a higher risk premium.
Speaker 2: I was pleased she took the conversation there. Lisa.
Speaker 3: This from Mohammad al Arian out on x formally known
Speaker 3: as Twitter, with this to say. The question, now, this
Speaker 3: is an important one which will only be answered in
Speaker 3: a few weeks when the meeting's minutes und released is
Speaker 3: the extent to which his remarks reflect his own biases
Speaker 3: or constitute an accurate summary of what was discussed by
Speaker 3: him and his f OO WEBC colleagues. And the Fed
Speaker 3: speak's going to start pretty immediately, Tom, almost straight after
Speaker 3: this gun into payrolls.
Speaker 2: We're going to hear from Fed officials.
Speaker 6: I agree with the first week's important. If we get
Speaker 6: a two forty on survey on non farm payrolls three
Speaker 6: months trailing two forty three oh three, two seventy, that's
Speaker 6: a fully employed America.
Speaker 5: Well, and you raised a real interesting question, which is essentially,
Speaker 5: is there now a new asymmetry in the market where
Speaker 5: the long end will sell off disproportionately if we do
Speaker 5: get a really big.
Speaker 1: Or hot print in the labor market.
Speaker 5: Essentially, the Fed's not going to look at this as
Speaker 5: a reason to hikered even to keep rates higher for
Speaker 5: longer necessarily, but it could mean longer term there could
Speaker 5: be a much more inflationary pressure.
Speaker 1: Under the hood.
Speaker 3: Really important staff ahead of payrolls on Friday, as Tom mentioned,
Speaker 3: the estimate in our survey two hundred and forty thousand,
Speaker 3: the previous number three hundred and three coming up next
Speaker 3: on the close, canning you into that in about fifteen
Speaker 3: minutes away Seth Compent, a chief Global Economy at Morgan Stanley.
Speaker 3: For the three of us will see you again, same time,
Speaker 3: same place, for the next Federal Reserve decision from New
Speaker 3: York City. This was the Fed Decides